TMI Tax Updates - e-Newsletter
February 5, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
GST
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Entry in relation to exemption of IGST on supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees deleted.
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Levy of IGST - removal of goods from the FTWZ unit - the goods are not to be subjected to IGST when bonded and the payment of integrated tax is to be effected when the goods are removed for home consumption from the bonded warehouse, under the Provisions of Customs Tariff Act.
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Levy of IGST - removal of goods from the FTWZ unit - In the event the Applicant is exclusively conducting the activity described in their Application of exporting goods to FTWZ and which are subsequently sold to Indian customers who clear the same on payment of appropriate customs duties, they are not liable to registration under Section 23(1) of CGST Act and TNGST Act.
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Classification of goods - industrial grade Calcium Hydroxide of high purity of 86% and industrial grade Calcium oxide of high purity of 86% are rightly classifiable under CTH 28259040 and CTH 28259090 respectively
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Classification of goods/services - classification has already been finalised at the supplier’s end who also happens to be manufacturer of the goods in question - HSN of goods do not merits any change in classification merely due to the fact that the goods in question are being supplied to the Indian railways
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Classification of goods - Eucalyptus/ Polar Wood Waste in Logs having length of 30 cm to 200 cm and Girth of approx. 10 cm to 60 cm - length and girth are not criteria for classification of wood - applicant has failed to correctly frame the question to which the classification is sought from the authority.
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The carry bags or shopping bags are covered in the Customs Tariff under CCTH 420222 depending on the material they are made up of. Shopping bags made of cotton are classified under CTH 42022220 and those made of non-woven fabrics are classifiable under CTH 42022210.
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Pure service - Providing Inspection services in relation to Water Supply and Sewerage to Chennai Metro Water Supply and Sewerage Board (CMWSSB) - Benefit of exemption from GST allowed.
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Works contract or not? - EPC Contract for electrical cable supply and laying work - the contract is not related to any original work and is in the nature of composite supply of Works Contract.
Income Tax
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Cancellation of Registration u/s 12AA - charitable activity - bogus donation - the High Court has committed error in entertaining the appeal against the remand order passed by the appellate- authority, and in quashing the order of cancellation of registration.
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Application u/s 119(2)(b) - condoning the delay in filing a refund application - there can not necessarily be independent proof or material to establish that the auditor in fact acted without diligence - delay condoned - claim of refund to be considered.
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Undisclosed stock - addition based on statement taken in search - treating the book value of goods approximately at 40 percent of the MRP cannot be said to be an arbitrary guess work taking into consideration the traits of the industry
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Waiver of interest for non payment of advance tax - the petitioner's case falls under Para 2(c) of the Notification, the respondent is directed to waive the entire interest levied u/s 234B.
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Exemption u/s 11 & 12 - property purchased in the name of chairman - the property in question has not only been used for residential purpose of the Chairman of the Society but has been extensibly used for conducting workshop by the faculty members - Additions made by AO deleted.
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Penalty u/s. 271D - trade advances received for the purpose of supply of goods dealt by the assessee - cannot be characterized as loan or deposit - Such trade advances cannot fall under the purview of section 269SS so as to attract penalty u/s. 271D
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Since the cost of purchase is treated as investment in land, the assessee is allowed to carry forward the unsold value of land as closing stock - The assessee cannot treat the difference between purchase price and sales price as loss and is also not eligible to carry forward as business loss u/s 71
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Claim for estimating income / deemed income u/s 44AD on remuneration and interest received from firms - the intention was to help small business to comply with the taxation provisions. Intention was not at all to construe a partner’s remuneration or interest as business income.
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Penalty levied u/s 271B - treatment of unaccounted sale as the turnover - requirement of audit u/s 44AB - the documents relied upon by the A.O. are neither the part of books of account nor would substitute the books of account or constitute the books of account of the assessee regularly maintained - No penalty.
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Exemption u/s 54 - LTCG - Since the construction was admittedly in progress, it may not be fit for human habitation as claimed by the Revenue authorities. But, the fact is that the assessee has invested the entire capital gain in purchasing the land and to construct the building, which is not in dispute.
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Levy of penalty u/s 272A(1)(c) - failure to comply with summons u/s 131(1A) - no reasonable cause for non-compliance to the notice issued u/s 133(6) - in absence of any reasonable cause been shown by the assessee, the penalty so levied u/s 272A(1)(c) and section 272A(2)(c) is hereby confirmed
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Reopening of assessment - addition u/s 68 - The assessee has miserably failed to discharge the onus that lay on her by section 68 of the Act. The creditworthiness of the creditors does not stand proved by any cogent evidence on record - additions confirmed.
Customs
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Classification of imported goods - Parts of E-Rikshaws - General interpretative rules of classification under customs cannot be read into any other statute including the Motor Vehicles Act, 1988 for classification.
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Classification of imported goods - parts of E-Rikshaws - E-Rickshaw is clearly a motor vehicle; but the three parts in question, even though being substantial components of an E-Rickshaw, cannot be termed as motor vehicle within the meaning of Section 2 (28) of the Motor Vehicles Act.
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Exemption to Additional Customs Duty on Aviation Turbine Fuel (ATF) - there is no such indication in the notification - General Rules of Interpretation cannot at all be used to interpret exemption notification
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Classification of imported goods - Raw Jute cutting grade imported by the appellant from Bangladesh through LCS Petrapole - to be classified as raw jute cutting grade under Tariff Heading 53039010
Service Tax
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Attachment of petitioner's Bank Account - service tax liability not determined - Without adjudication, no steps for coercive recovery u/s 87 of the Finance Act can be taken by the authorities.
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Business Auxiliary Services - amount collected as co-loaders from other courier agencies - It cannot be said that the service has been rendered on behalf of the courier agency. Consequently, activity cannot be covered under the definition of BAS.
Central Excise
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Amount paid on direction of Department - they have not paid any interest on the amount paid - Therefore, all conditions of Section 11A(2B) have not been fulfilled and therefore, the payment cannot be said to be payment u/s 11A(2B).
VAT
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Valuation - inclusion of discount in assessable value - Either the Assessing Officer could have added on the discount to the returned turnover or taxed the estimated turnover adding G.P. When the sales turnover is estimated after computing the G.P then necessarily the entire turnover is taxed - contrary is liable to set aside.
Articles
Notifications
GST-
02/2019 - dated
4-2-2019
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IGST Rate
Seeks to rescind Sl. No. 10D of Notification No. 09/2017-Integrated Tax (Rate) dated 28.06.2017 in relation to exemption of IGST on supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees
GST - States-
F.1-11(91)-TAX/GST/2018(Part II) - dated
19-1-2019
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Tripura SGST
Amendment in Notification No. F.I-11(91)-TAX/GST/2017(Part) dated the 9th November, 2017
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. F.1-11(91)-TAX/GST/2018(Part), dated the 8th August, 2018,
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in the Notification Nos. 291 & 430, dated 08.08.2017 & 16.11.2017 respectively
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification Nos. 332 & 86 dated 16.11.2017 & 23.03.2018 respectively
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. F.1-11(91)-TAX/GST/2018, dated the 8th August, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. F.1-11(91)-TAX/GST/2018, dated the 11th September, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. F.1-11(91)-TAX/GST/2018(Part) dated the 14th September, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Tripura State Goods and Services Tax (Fourteenth Amendment) Rules, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. F.1-11(91)-TAX/GST/2018, dated the 22nd February, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Seeks to specify the late fee payable for delayed filing of FORM GSTR-3B and fully waive the amount of late fees leviable on account of delayed furnishing of FORM GSTR-3B for the period July, 2017 to September, 2018 in specified cases
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. F.1-11(91)-TAX/GST/2017(Part), dated the 5th January, 2018,
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Tripura State Goods and Services Tax (Second Removal of Difficulties) Order, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Tripura State Goods and Services Tax (Third Removal of Difficulties) Order, 2018
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F.1-11(91)-TAX/GST/2017(Part-VI) - dated
31-12-2018
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Tripura SGST
Tripura State Goods and Services Tax (Fourth Removal of Difficulties) Order, 2018
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30/2018-State Tax (Rate) - dated
31-12-2018
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Tripura SGST
Inserts the Explanation in the Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017
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29/2018-State Tax(Rate) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. 13/2017- State Tax (Rate), dated the 29th June, 2017
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28/2018-State Tax(Rate) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. 12/2017-State Tax (Rate), dated the 29th June, 2017
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27/2018-State Tax(Rate) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017
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26/2018-State Tax(Rate) - dated
31-12-2018
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Tripura SGST
Seeks to exempt State tax on supply of gold by nominated agencies to exporters of gold jewellery
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25/2018-State Tax(Rate) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. 2/2017-State Tax (Rate), dated the 29th June, 2017
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24/2018-State Tax(Rate) - dated
31-12-2018
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Tripura SGST
Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (2) TMI 195
Levy of IGST - removal of goods from the FTWZ unit - Goods warehoused in FTWZ and supplied to a DTA unit - applicability of Circular No. 46/2017 - Held that:- In the case at hand, the applicant imports the goods from BNSL, files ‘into bond Bill of Entry’ and stores the goods in the FTWZ run by an independent third party but the legal possession of the goods are with BSNL. When the Applicant receives orders from their customers in India, BNSI clears the goods on filing the ‘BOE for Home Consumption’ and pays the appropriate customs duty - the Applicant is storing the imported goods in FTWZ which is a Customs bonded warehouse. It is evident that removal from the FTWZ to DTA is the point of deferred levy/payment of Customs Duty, i.e., at the time of clearance for home consumption from FTWZ. Further, as explained in the Circular 3/ 1/2018-IGST dated 25th May 2018, the goods are not to be subjected to IGST when bonded and the payment of integrated tax is to be effected when the goods are removed for home consumption from the bonded warehouse, under the Provisions of Customs Tariff Act. Therefore, there is no requirement to pay IGST under the provisions of GST law at the time of clearance from the FTWZ. In the case at hand, the Applicant proposes to effect sale when the goods are bonded and then files Bill of Entry for Home Consumption and clears the goods from the FTWZ on payment of appropriate Custom duties (BCD & IGST). Therefore, as clarified in the Circular No.3/1/2018-IGST dated 25th May 2018, the payment of IGST again at the point of clearance from the FTWZ to DTA do not arise for supply of warehoused goods, while being deposited in a customs bonded warehouse/FTWZ on or after 01.04.2018 - Circular No. 46/2017 Customs dated 24.11.2017 is not applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse/FTWZ on or after 01.04.2018.
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2019 (2) TMI 194
Levy of IGST - removal of goods from the FTWZ unit i.e. the customs bonded warehouse - requirement of registration under IGST - applicability of Circular No.3/1/2018-IGST dated 25th May 2018 - Held that:- In the case at hand, the Applicant stores the goods in the FTWZ for which the LSP in the FTWZ, file 'into bond Bill of Entry' with a nominal value. The Applicant on identifying the purchaser, raise commercial invoice and thereafter the DTA purchaser files the 'ex-bond BOE' for the Commercial Invoice value and pays the appropriate BCD and IGST. The invoice price is paid to the applicant by the DTA purchaser - the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse, under the provisions of Customs Act. Circular No.3/1/2018-IGST dated 25th May 2018 was made applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse on or after 01.04.2018. Removal from the FTWZ to DTA is the point of deferred levy/payment of Customs Duty, i.e., at the time of clearance for home consumption from FTWZ. Further, as explained in the Circular, the goods are not to be subjected to IGST when bonded and the payment of integrated tax is to be effected when the goods are removed for home consumption from the bonded warehouse, under the Provisions of Customs Tariff Act. Therefore, there is no requirement to pay IGST under the provisions of GST law at the time of clearance from the FTWZ. Registration - Held that:- In the case at hand, the Applicant proposes to effect sale when the goods are bonded and then DTA customer files Bill of Entry for Home Consumption and clears the goods from the FTWZ on payment of appropriate Custom duties (BCD & IGST). Therefore, as clarified in the Circular No.3/ 1/2018-IGST dated 25th May 2018, the payment of IGST again at the point of clearance from the FTWZ to DTA do not arise for supply of warehoused goods, while being deposited in a customs bonded warehouse/FTWZ on or after 01.04.2018. In the event the Applicant is exclusively conducting the activity described in their Application of exporting goods to FTWZ and which are subsequently sold to Indian customers who clear the same on payment of appropriate customs duties, they are not liable to registration under Section 23(1) of CGST Act and TNGST Act.
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2019 (2) TMI 193
Classification of goods - rate of GST - Quicklime having 86% Calcium oxide content - Slaked lime having 86% Calcium hydroxide content - Held that:- Chapter 2522 of Customs Tariff covers Quicklime, Slaked Lime and Hydraulic Lime, Other Than Calcium Oxide and Hydroxide of Heading 2825 and CTH 2522 1000 covers Quick lime and CTH 25222000 covers slaked lime - According to Wikipedia, Calcium Oxide is in manufacturing of cement, paper, and high-grade steel, for medicinal purpose and insecticides. Calcium Hydroxide is used in food, paper industry and in water and sewage treatment plant. It is seen that purified forms of calcium oxide and calcium hydroxide having industrial applications with high purity, which is the case in hand here, are covered under CTH 28259090 for calcium oxide and CTH 28259040 for calcium hydroxide. It is found from the manufacturing process and the requirement of the intended buyers, that the goods to be supplied is industrial grade Calcium Hydroxide of high purity of 86% and industrial grade Calcium oxide of high purity of 86% are rightly classifiable under CTH 28259040 and CTH 28259090 respectively taxable at 9% CGST and 9% SGST as per entry sl.No.38 of Schedule III of Notification no. 01/2017-C.T.(Rate) dated 28.06.2017 as amended and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively.
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2019 (2) TMI 192
Classification of goods/services - rate of tax - Air dryer complete with final filter for used in breaking system of locomotive supplied to Railway - Held that:- On going through HSN code 8421, it is observed that the Air dryers, which is used for removing water vapour from compressed air or to remove the moisture from wet substances has been classified under 8421 ibid. - Further, M/S Trident Pneumatics Pvt. Ltd., Coimbatore is a manufacturer and supplier of “Air Dryer (LD2000132) Locomotive Dryer-Il” as per the Invoice No. TPPL/3187/1718 dated 27.03.2018 invoiced to the applicant by classifying the said good under Chapter 8421 of the GST Tariff Act 2017 which attracts GST@18% (9% CGST + 9% SGST). In the light of the fact, classification of ‘Air Dryer’ (HSN 8421) has already been finalised at the supplier’s end who also happens to be manufacturer of the goods in question i.e. M/s. Trident Pneumatics Pvt. Ltd., Coimbatore, which is evident from the tax invoice, dated 27.03.2018. The same goods without any modification/ processing are being further supplied to the Western Railways by the applicant. Hence it is clear that HSN of goods do not merits any change in classification merely due to the fact that the goods in question are being supplied to the Indian railways.
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2019 (2) TMI 191
Levy of GST - supply of ‘Rejected Wheat Seed’ and ‘Rejected Paddy Seed’ - Difference of opinion - Held that:- As there is difference of opinion, a reference made to the Appellate Authority for hearing and decision on said issue in terms of Section 98(5) of the Act ibid which provide that where the members of the Authority differ on any question on which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision on such question. Matter referred to Appellate Authority.
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2019 (2) TMI 190
Classification of goods - Eucalyptus/ Polar Wood Waste in Logs having length of 30 cm to 200 cm and Girth of approx. 10 cm to 60 cm - whether covered under HSN 4401 and chargeable to tax under Uttarakhand State GST @ 2.5% and under CGST @ 2.5%? Held that:- Though the applicant is seeking advance ruling in respect of Eucalyptus / Poplar Woods Waste in Logs having length of 30 cm to 200 cm and Girth of approx. 10 cm to 60 cm, so as to classify the same under Chapter heading 4401 (attracting GST @ 5% in respect of Wood in chips or particles), the applicant has failed to correctly frame the question to which the classification is sought from the authority - since length and girth are not criteria for classification of wood under Chapter 44 or more specific 4401, therefore, the answer in given-in negative to the question which the applicant has sought.
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2019 (2) TMI 189
Classification of goods - rate of tax - Nonwoven and Cotton bags - Held that:- The carry bags or shopping bags are covered in the Customs Tariff under CCTH 420222 depending on the material they are made up of - Shopping bags made of cotton are classified under CTH 42022220 and those made of non-woven fabrics are classifiable under CTH 42022210. Rate of tax - Held that:- Non-woven and cotton carry bags supplied by the Applicant were taxable to 9% CGST and 9% SGST as per SI no 126 and 127 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively - the carry bags/shopping bags made of cotton/jute are taxable at 6% CGST and at 6% SGST as per SI no 89 of Schedule II while those carry bags made of non-woven fabrics are taxable to 9% CGST and 9% SGST as per SI no 124 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively.
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2019 (2) TMI 188
Classification of goods - rate of tax - Bags made of Non-Woven Fabrics of Polypropylene / 100% Cotton (Grey Fabrics) used the Packing of goods, commonly called as Stick Bags, Wedding Gift Bags, Re-useable Shopping Bags, Draw-String, Gift Bags, Garment Bags, etc. - Held that:- The bags which are used for packing of goods for transport, storage and sale are covered under 6305 - In this case the bags of any materials are used for packing the goods which are then put up for sale, transport or storage. That is such goods because of their very nature, being loose, flowing or in bulk etc, cannot be sold without packing by such bags. However, in the instant case, the Applicant has stated that the goods in question are carry bags also called as Re-usable Shopping Bags, Drawstring Gift Bags, Garment Bags. These Bags have handles for carrying. Textiles or jewellery or other items after they are purchased by the Customers are put in these Bags and given to Customers to carry /take away from the shops. These bags are not used for packing, but for ease of carrying being in the nature of Shopping Bags. The carry bags or shopping bags are covered in the Customs Tariff under CCTH 420222 depending on the material they are made up of. Shopping bags made of cotton are classified under CTH 42022220 and those made of non-woven fabrics are classifiable under CTH 42022210. Rate of tax - Held that:- Non-woven and cotton carry bags supplied by the Applicant were taxable to 9% CGST and 9% SGST as per SI no 126 and 127 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively - the Carry Bags/Shopping Bags made-up of Cotton are taxable at 6% under CGST Act 2017 and at 6% under SGST Act 2017 as per Sl.No.89 of Schedule II while those Carry Bags made of Non-woven Fabrics are taxable to 9% under CGST Act 2017 and 9% under SGST Act 2017 as per Sl.No.124 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively.
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2019 (2) TMI 187
Pure service - Management Consultant and DPR services provided to Chennai Metro Water Supply and Sewerage Board (CMWSSB) for the water related projects at Chennai - whether CMWSSB is Government Entity or not? - Exemption under SI. No. 3 of N/N. 12/2017-CT (Rate) dated 28th June 2017 - Held that:- If any “Pure Services” are provided to a Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution and that 'Governmental Authority' is an Authority or a Board set up by an Act of Parliament or a State Legislature or established by the Government with 90 percent or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243 W of the Constitution, then the same is exempted vide SI.No. 3 of the Notification No. 12/2017-Central Tax (Rate). In the case at hand, from the documents furnished by the Applicant, we find that CMWSSB is a Board constituted by an act of Tamil Nadu State Legislature called Chennai Metropolitan Water Supply and Sewerage Act, 1978 (Tamil Nadu Act 28 of 1978) with 100% contribution by way of Government (i.e. by way of takeover of Assets and Liabilities from Chennai Municipal Corporation and Tamil Nadu Water Supply and Drainage Board) and controlled by the Government by way of appointing Directors of the CMWSS Board, to cariy out the functions of supplying water for domestic, industrial and commercial purposes as well as Sanitation Conservancy by way of disposal of Sewer - The Twelfth Schedule or Article 243W of the Constitution list the functions of the municipality at SI No 5 as “Water Supply for domestic, industrial and commercial purposes “and at SI No 6 as “Public health, sanitation conservancy and solid waste management” - Thus, CMWSSB is a 'Governmental authority' as defined under 2(zf) of the Notification No. 12/2017-Central Tax (Rate) 28th June 2017. The activity of the Applicant envisaged by the three agreements furnished by the applicant is supply of 'Pure Services' to CMWSSB which is a 'Governmental Authority” relating to water supply for industrial use and sanitation conservancy which are covered under Twelfth Schedule of Article 243 W of the Constitution. Therefore, the services rendered by the Applicant are exempted from CGST under SI.No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 as amended and exempted from SGST under Sl.No. 3 of the G.O. (Ms) No. 73 dated 29.06.2017 No.II (2)/CTR/532(d-15)/2017 as amended.
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2019 (2) TMI 186
Pure service - Providing Inspection services in relation to Water Supply and Sewerage - Government authority - Benefit of SI.No. 3 of Notification No. 12/201 /-CT (Rate) dated 28th June 2017 - applicant providing Third Party Inspection Services to their clients viz., M/s. Chennai Metro Water Supply and Sewerage Board (CMWSSB) and M/s. Tamil Nadu Water Supply and Drainage Board (TWAD) for the water related projects - Notification is effective from 01/07/2017 - pure services - taxability of Invoices already raised on the client prior to 01/07/2017. Held that:- If any “Pure Services” are provided to a Governmental Authority by way of any activity in relation to any function entrusted to a Municipality under Article 243 W or a Panchayat under Article 243 G (from 13.102017) of the Constitution and that 'Governmental Authority' is an Authority or a Board set up by an Act of Parliament or a State legislature or established by the Government with 90 percent or more participation by way of equity or control to carry out any function entrusted to a Municipality under article 243 W of the Constitution, then the same is exempted vide SI.No. 3 of the Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017. In the case at hand, M/s. CMWSSB is created vide The Chennai Metropolitan Water Supply and Sewerage Act, 1978 (Tamil Nadu Act 28 of 1978) with 100% contribution by way of Government (i.e. by way of takeover of Assets and Liabilities from Chennai Municipal Corporation and Tamil Nadu Water Supply and Drainage Board) and controlled by the Government by way of appointing Directors of the CMWSS Board, to carry out the functions of supplying water for Domestic, Industrial and Commercial purposes as well as Sanitation Conservancy by way of disposal of Sewerage. M/s. TWAD Board is a Board, constituted by an Act of Tamil Nadu State Legislature called Tamil Nadu Water Supply and Drainage Board Act, 1970 with 100% contribution by way of Government and controlled by Government by way of appointing Directors of the TWAD Board entrusted with the development of Water Supply and Sewerage facilities in Municipalities and Panchayats in the State of Tamil Nadu, except Chennai Metropolitan Development. Thus, in respect of services received in relation to functions pertaining to Municipality, M/s. CMWSSB and M/s.TWAD is a 'Governmental Authority' as defined under 2(zf) of the Notification No. 12/2017-CT (Rate) as amended. However, in respect of Services received in relation to functions pertaining to Panchayat, TWAD is a 'Governmental Authority' only from 13.10.2017 as defined under 2(zf) of the Notification No. 12/2017-CT (Rate) as amended. In the two agreements furnished by the Applicant, the Applicant is suppling 'Pure Services' of Inspection to M/s. TWAD and M/s. CMWSSB which is a 'Governmental Authority” relating to Water Supply and Sewerage which are covered under Twelfth Schedule of Article 243 W of the Constitution. Therefore, the services rendered by the Applicant are exempted from CGST under SI.No. 3 of the Notification No. 12/2017-CT (Rate) dated 28th June 2017 as amended and exempted from SGST under SI.No. 3 of the G.O. (Ms) No. 73 dated 29.06.2017 No.II (2)/CTR/532(d-15)/2017 as amended. Other question raised before us is regarding raising of credit notes is of procedural nature and therefore not answered.
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2019 (2) TMI 185
Works contract or not? - EPC Contract for electrical cable supply and laying work - whether can be classified as contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract or can be classified as works contracts as per GST Law? - N/N. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by notification Tax (Rate) dated 25th Jan 2018. Held that:- Works contract will be treated as service and tax would be charged accordingly. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract” Existence of immovable property or not which is transferred in the execution of the contract - Held that:- The work of applicant involves supply, erection, testing and commissioning including transport, loading, unloading, insurance etc of transformer substations, HT & LT Overhead Line & Cable Through Underground. Their EPC contract for electrical cable supply and laying work can be classified as contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract - there are no hesitation in holding that the applicant is supplying Works Contract Services. It is also apparent that the nature of the works undertaken by the applicant are not in the nature of ‘Original Works’ as per detailed discussions in the latter part of the findings. Works contract or not? - applicability of N/N. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by N/N. 01/2018-Central Tax (Rate) dated 25th Jan 2018 - Held that:- In the subject case it is seen that the applicant is providing composite supply of Works Contract in respect of Metro but the reduced rate of tax is available only if the work is of the type of ORIGINAL WORKS. Original Works would mean ; all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, commissioning or installation on of plant, machinery or equipment or structures, whether pre-fabricated or otherwise, etc. In the present case the work done by the applicant does not appear to be original works. The applicant themselves have stated that “Here we would like to draw your attention to the fact that our scope of work does not include construction of entire project of Metro stations, railway line, power supply, civil structures etc. but scope include “Shifting LT,HT Overhead lines crossing which are obstructing metro railway path and providing LT,HT underground cables for Nagpur Metro Rail Project. The work is not construction of metro rail project but this is shifting of existing utilities obstructing metro railway path and providing supplying and installation of new underground cable along with its accessories. Thus, in the present case, the contract is not related to any original work and is in the nature of composite supply of Works Contract - the activity of the applicant in the present case is nothing but a composite supply of Works Contract, not being original works and they will be covered under Sr.No. 3, item no. (ii) of Notification No. 11/2017 dated 28.06.2017 as amended by Notification No. 1/2018 dated 25.01.2018 and attract GST (9% each of CGST and SGST).
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2019 (2) TMI 184
Validation of returns - migration to GST Regime - Held that:- The learned Standing Counsel for the 4th respondent informs the Court that the authorities will look into the petitioner's claim for validation - Writ Petition is closed as it does not survive for further consideration.
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Income Tax
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2019 (2) TMI 183
Revision u/s 263 - AO has not complied with the directions given by the Tribunal in its judgment & order - ITAT upholding order passed under section 263 by CIT(A) - Held that:- This is an application for early hearing of the appeals. List the appeals in the month of July, 2019 before the appropriate Bench.
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2019 (2) TMI 182
Registration u/s 12AA - bogus donation - cancellation of registration - Held that:- Leave granted. In terms of the signed non-reportable judgment, the appeal is allowed.
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2019 (2) TMI 181
Cancellation of Registration u/s 12AA - charitable activity - bogus donation - Held that:- In the proceedings initiated for the cancellation of registration, mainly it was the case of the assessee that proceedings for cancellation were initiated only on the ex-parte statement of the representative of the donor, without giving any opportunity to the assessee. Though a survey was also conducted on the assessee, but nothing adverse was found during such survey to support the case of the appellant, to cancel the registration. Also brought to our notice the various provisions of the Act but, at the same time, in support of the arguments that all donations are not exempted, but having regard to the reasons recorded in the impugned order, it is not necessary for us to delve deep at this stage. From the perusal of the order passed by the High Court, it is clear that the High Court has allowed the Writ Petition mainly on one ground, namely, that one bogus donation would not establish that the activities of the trust are not genuine. A reason assigned by the High Court is erroneous and runs contrary to the plain language of Section 12AA(3). In view of the serious allegations made against the respondent trust, it is a matter for consideration of the issue, after giving opportunity as pleaded by the respondent but the High Court has committed error in entertaining the appeal against the remand order passed by the appellate- authority, and in quashing the order of cancellation of registration. We are of the view that the order impugned is liable to be set aside and the same is, accordingly, hereby quashed and set aside.
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2019 (2) TMI 180
Liability of partner after retirement - recovery of dues of the firm from partners - Held that:- Respondent No. 2 has incorrectly discarded the stand of the petitioner of having retired from the partnership. No provision under the Partnership Act 1932 has been brought to our notice which would require a resolution to be passed by the firm before a partner, that too, in a partnership at will, can retire. However, this conclusion would not solve the entire issue. Several other considerations would have to be weighed before the question of recovery of dues of the firm can be made against the petitioner. Firstly, the Authority has not examined the genuineness or correctness of the communication dated 10.12.1999 under which the petitioner claimed to have retired as a partner of the firm. Secondly, the question of outgoing partner being liable for the dues of the third party even after retirement unless public notice or knowledge of such retirement can be imputed on said third party may also have to be gone into. For such reasons, we would prefer that respondent No. 2 decides the entire issue afresh after giving fresh opportunity to the petitioner of hearing if he so desires. Accordingly, the impugned order is set aside. The issue placed back before Respondent No. 2 for passing fresh order in accordance with law.
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2019 (2) TMI 179
Notice u/s 179 - Liability of directors of private company in liquidation - showcause notice under section 179 issued only to petitioner no.1, Smt. Anandhi P. Naig and petitioner no.2, Shri Pandoo P. Naig and that the other persons were not served with any such notice and were not given any opportunity of hearing - Held that:- Except for petitioners No.1 & 2, the rest of the petitioners have not being served with any notice under section 179 of the Act and therefore, the impugned order is in breach of the principles of natural justice as well as contrary to the statutory provisions. Having regard to the submissions advanced by the learned counsel for the petitioners, issue Notice, returnable on 12.02.2019. By way of adinterim relief, the impugned order dated 31.12.2018 passed under section 179 of the Act as well as the consequential demand notice under section 156 of the Act are hereby stayed.
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2019 (2) TMI 178
Disallowing expenditure - proof of receipt of any service from the consultant - addition on statement of said Shri Gupta recorded during search operations held that the said person had not rendered any service to the assessee-company so as to receive such payments - retraction of statement - Held that:- We notice that the entire issue is based on the appreciation of materials on record. CIT (Appeals) and the Tribunal concurrently held that there was sufficient evidence justifying the payment to Shri S.K.Gupta, a Consultant and that the Assessing Officer other than relying upon the retracted statements of Shri Gupta recorded in search, had no independent material to make the additions. No question of law arises. Deduction u/s 80IA - assessee had set up a captive power generating unit - rate at which the electricity generated by one unit of the assessee-company and provided to the another be valued - Held that:- The profits of the business of generation of power worked out by the Assessee on the basis of the price that it paid to TPC for purchase of power continues to be the best basis even after the order of MERC and therefore the same has to be accepted as was done in the past and as approved by the ITAT in Assesssee's case. See Reliance Infrastructure Limited Vs. Addl. CIT [2011 (1) TMI 36 - ITAT, MUMBAI] - Decided against revenue
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2019 (2) TMI 177
Application u/s 119(2)(b) - condoning the delay in filing a refund application - Held that:- The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. “Bonafide” is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the petitioner raises (concededly belatedly), there can not necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. The petitioner, in our opinion, was able to show bonafide reasons why the refund claim could not be made in time. The statute or period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities – including Revenue Authorities have to construe them in a reasonable manner. That was the effect and purport of this court’s decision in Indglonal Investment & Finance Ltd. (2011 (6) TMI 229 - DELHI HIGH COURT). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case. The impugned order rejecting the petitioner’s application under Section 119(2)(b) is hereby set aside and quashed. The application for condonation of delay is hereby allowed for these reasons. The petitioner is permitted to prefer its refund claim within two weeks from today. In such event, the concerned Assessing Officer shall verify the concerned claim and pass the order in accordance with law within six weeks thereafter. Any amount due to the petitioner shall also be remitted to it within three weeks thereafter.
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2019 (2) TMI 176
Entitlement to benefit u/s 80IB - assessee company is a private company, engaged in manufacture and trade of electronic and electrical equipments and goods - CIT(A) accepted assessee's plea and held that the turnover stipulations in terms of the investments in the fixed assets by Note 1 of the DIPP circular had been complied with also affirmed by ITAT - Held that:- The Revenue highlights the report of the Auditor and submits that since this was the material on record, which the AO gave importance to, CIT(A) as well as ITAT were in error in choosing to ignore it. This Court is of the opinion that no substantial question of law arises, as it is far too well settled that the duty of the Assessing Officer is to apply the law in the given facts regardless of the position of the Revenue or the assessee in the course of the proceedings [refer to Kedarnath Jute Mfg. Co. Ltd. vs. Commissioner of Income Tax, Central Calcutta - 1971 (8) TMI 10 - SUPREME COURT]. - Decided against revenue
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2019 (2) TMI 175
Reopening of assessment - issue of sales tax benefit given by the State Government as revenue in nature and qualification for deduction under Section 80IA - Held that:- During regular Assessment proceedings under Section 143(3) of the Act the Assessing Officer had occasion to deal with the issue of sales tax benefit given by the State Government is revenue in nature but cannot qualify for deduction under Section 80IA as it is not derived from the Industrial undertaking which forms the basis of the recorded reasons to issue the reopening notice dated 7th July, 2013. In the above facts, the impugned order hold that this would be a clear case of change of opinion. Therefore, as the notice of reopening is without jurisdiction, the consequent orders of Assessment is also bad. It is a settled position in law that reopening of assessment even within a period of four years from the end of the relevant Assessment Year cannot be done on the basis of a change of opinion. If the Assessing Officer had occasion to deal with the issue which is the basis of the reopening notice (as reflected in the recorded reasons), earlier in the regular assessment proceedings under Section 143(3) of the Act, then the notice for reopening would be a case of reviewing the earlier order - Decided in favour of assessee.
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2019 (2) TMI 174
Addition based on documents found in search - undisclosed cash payments - Held that:- We find that the Tribunal has examined the materials on record to come to factual conclusion that there was no evidence to link the assessee with the alleged cash payments referred to in the documents seized during the search against the Dhariwal Industries. We notice that except for reference in such documents to one P.C.Jain there was no clarity about the identity of receiptant of such a money. The department could not bring on record any evidence to link the assessee with such receipt. Learned counsel for the assessee had pointed out that even in his statement said Shri Sohan Raj Mehta had not stated that such payments were made to the assessee. - Decided against revenue
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2019 (2) TMI 173
Estimation of income - Undisclosed stock - addition based on statement taken in search - disclosure made by an employee of assessee - Held that:- When there is a finding of fact that on the basis of physical verification, a difference was found in the goods with the assessee, and therefore, addition was made, then it cannot be said that the Tribunal erred in law while holding the additions to be valid because such additions were not solely based on the disclosure made by an employee of assessee which was later on retracted, but on the basis of stock verification, therefore, first and second proposed substantial questions of law are answered in the following terms, namely, when discovery of stock is based on physical verification then merely retraction of disclosure by the assessee is not sufficient to discard findings of physical verification and thus in the light of the law laid down in the case of Dialust (2002 (1) TMI 9 - BOMBAY HIGH COURT) information from survey may be used to justify addition, no illegality be attributed to such addition. Appellant's contention is that the tax Tribunal made addition of ₹ 10 Lacs resorting only to guess work. This too is not correct inasmuch as on physical verification excess stock was found and in fact the Tribunal accepted explanation given by the assessee that the supervisor present at the time of survey was not knowing the value of the goods, and therefore, treating the book value of goods approximately at 40 percent of the MRP cannot be said to be an arbitrary guess work taking into consideration the traits of the industry, and therefore, there being no other material to prove to contrary, restriction of addition to a sum of ₹ 10 Lacs by way of estimate and preponderance of probability cannot be said to be arbitrary and illegal. In the present case addition is not based on guess but on the basis of estimates and preponderance which could not be refuted by the assessee, and therefore, addition cannot be faulted with. The view taken by the Tribunal is a possible view and is not based on any wild guess or suspicion. - Decided against assessee
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2019 (2) TMI 172
Waiver of interest for non payment of advance tax - refund of interest already pad - dispute regarding Nature of expenses - modernization and replacement expenses - revenue or capital expenditure - petitioner wanted to modernise their mill by removing old, worn out machinery and replacing the same by new machinery - Held that:- The common thread running through all the decisions refereed is that any expenditure incurred on account of modernisation and replacements of machinery of the textile mills will have to be considered only as revenue expenditure. As late this was the position that prevailed. The learned counsel for the petitioner has enclosed an order rendered THE COMMISSIONER OF INCOME TAX MADURAI VERSUS M/S. SRI MANGAYARKARASI MILLS (P) LTD MADURAI [2006 (12) TMI 562 - MADRAS HIGH COURT] in this case. The respondent is not in a position to show any contra decision. Therefore, the assessee cannot be blamed for short payment of advance tax by taking into account the expenditure incurred on this score. The case on hand squarely falls within Para 2(c) of the Notification dated 26.06.2006 issued by the Central Board of Direct Taxes. Even though these aspects have been pointedly raised by the assessee, the impugned order does not deal with the same at all. In this view of the matter, the order impugned in this writ petition is quashed. Since as already held that the petitioner's case falls under Para 2(c) of the Notification dated 26.06.2006, the respondent is directed to waive the entire interest levied under Section 234B. The petitioner had already paid the interest in terms of Section 234 B of the Income Tax Act. Since held that the said interest will have to be waived, the petitioner is not only entitled to refund of the amount paid but also is entitled to interest thereon. The issue is covered by the decision of the Hon'ble Supreme Court reported in K.Lakshmansa and Co v. Commissioner of Income Tax and Another [2017 (11) TMI 589 - SUPREME COURT]. The respondent shall refund the amount in question with interest within a period of three months from the date of receipt of a copy of this order.
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2019 (2) TMI 171
Exemption u/s 11 & 12 - property purchased in the name of chairman - Held that:- In the instant case, AO in order to deny the exemption u/s 11 (2) of the Act misstated the fact that the property in question has been purchased in the name of Fr. Shaji Mathews, Chairman of the Society, whereas it is not the case, rather the property was purchased in the name of the society but through its Chairman. In order to carry out the charitable activities, the Chairman of the assessee society needs accommodation otherwise he would have to put in rented accommodation. Assessee brought on record evidence, available to prove the fact that the property in question has not only been used for residential purpose of the Chairman of the Society but has been extensibly used for conducting workshop by the faculty members, for conducting Hindi workshop, to convene meetings of the academy’s core committee etc., and these facts go to prove that the property in question was also being used in order to carry out the charitable activities by the society. So, we are of the considered view that the CIT (A) has rightly deleted the addition of ₹ 80,00,000/- by holding that the assessee society is eligible for benefit of sections 11 & 12. Addition being the amount accumulated in earlier years u/s 11(2) - since exemption under sections 11 and 12 of the Act treating the assessee as AOP has been declined accumulated income has been treated as surplus for assessment year 2010-11 - Held that:- CIT(A) after thrashing the issue in detail and by relying on the various decisions rendered by the co-ordinate Bench of the Tribunal on the issue in question reached the conclusion that when the assessee is held to be eligible for benefit of sections 11 and 12, the assessee society cannot be treated as AOP. So, in these circumstances, since the assessee is held to be eligible for getting benefit under sections 11 and 12 of the Act, the time is available with it for use of accumulated fund of earlier years, hence ld. CIT (A) has rightly deleted the addition. So, Ground No.2 is determined against the Revenue. Disallowance of claim of the assessee qua accumulation of surplus under section 11(2) - since the benefits of sections 11 and 12 are not available to the assessee society, the same is treated as AOP - Held that:- Again we are of the considered view that when the assessee is held to be eligible for exemption under sections 11 and 12 of the Act as per our findings on Ground No.1 and has applied under section 11(2) of the Act for accumulation of funds vide letter dated 07.07.2010 in the prescribed Form No.10 addressed to concerned Additional CIT, the addition is not sustainable. So, the ld. CIT(A) has rightly deleted the addition. Addition on account of negative cash balance in the month of December and February - Held that:- Assessee has furnished details of the cash credit which were not shown in the cash book by mistake, which have been extracted by ld. CIT (A) on page 25 of the impugned order, and finding the same correct on factual verification from the bank statement as well as ledger account, found that no negative cash balance and the impugned cash expenditure were out of withdrawals from the bank accounts and other cash receipts. So, in these circumstances, there is no scope to interfere in the findings returned by the ld. CIT(A) deleting the addition made by the AO on account of negative cash balance in the months of December and February. So Ground determined against the revenue.
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2019 (2) TMI 170
Addition u/s 69B - difference between closing stock as per the books vis-à-vis stock statement given to the bank - Held that:- In the present assessment year, there is no independent finding at the end of the AO or CIT(A). There is no variation on facts that except the difference between the stock statements available in the books vis-à-vis given to the bank has been scaled down between A.Y.2009-10 to this assessment year. CIT(A) has observed that addition has been made on the basis of the finding recorded in the Asstt.Year 2009-10. Therefore, considering the fact that there is no disparity between the facts of both these years, we are of the view that the issue is squarely covered by the decision of jurisdictional High Court in the assessee’s own case for the Asstt.Year 2009-10. The ld.CIT(A) has rightly deleted the addition. This ground of appeal is rejected. Addition u/s 41(1) - credit against names of five parties had remained outstanding in the books of the assessee from the F.Y.2007-08 - AO directed the assessee to explain as to why this liability should have not been considered as ceased - AO harboured a belief that liability to pay has ceased, and therefore, it deserves to be treated as income under section 41(1) - Held that:- The section 41(1) applies where a trading liability was allowed as a deduction in an earlier year in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in a later year by way of remission or cessation of the liability. In such a case the section says that whatever benefit has arisen to the assessee in the later year by way of remission or cessation of the liability will be brought to tax in that year. The principle behind the section is that the provision is intended to ensure that the assessee does not get away with a double benefit - once by way of deduction in an earlier assessment year and again by not being taxed on the benefit received by him in a later year with reference to the liability earlier allowed as a deduction. There is nothing in the possession of the Revenue to doubt the non existence of the liability, more so, if the facts are being examined in the light of Hon’ble High Court’s decision in the case of CIT Vs. Bhogilal Ranjibhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT]. On due consideration of the above facts, we do not find any merit in this ground of appeal of the Revenue. Disallowance of commission expenses - AO had issued a show cause notice inviting explanation of the assessee as to why this commission should not be disallowed, and more particularly, how can HUF be acted as an agent, and commission should be paid - Held that:- No such inquiry has been made. As far as allegations of commission paid to the HUF are concerned, HUF is a separate legal entity. The ld.CIT(A) did not dispute about the payment of commission to HUF, but recorded a finding against the assessee for statistical purpose, because this payment to HUF is also confirmed because it is part of total commission claim at ₹ 53,56,535/- which has been disallowed by the AO and confirmed by the ld.CIT(A). CIT(A) did not deem it necessary to examine this aspect. This finding of the ld.CIT(A) recorded has not been challenged by the Revenue in its appeal. Services on behalf of the HUF could be rendered by Karta, and commission payment merely on account that it is juridical taxable entity, cannot be disallowed. Assessee has brought on record evidence justifying the payment of commission, which is just 0.60% on the total sales. AO except suspecting incurrence of such expenditure did not make any inquiry. Therefore, we allow this ground of appeal, and delete disallowance - decided in favour of assessee.
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2019 (2) TMI 169
Penalty u/s. 271D - violation of the provisions u/s. 269SS - whether the trade advances could be called as ‘loan’ or ‘deposit’ in terms of provisions of section 269SS? - Held that:- The terms ‘loan’ and ‘deposit’ are not mutually exclusive, there are a number of common features between the two. It was held in the case of Abdul Hamid Sahib v. Rahmat Bi [1964 (12) TMI 62 - MADRAS HIGH COURT] that a loan is repayable the moment it is incurred while it is not so with the deposit. In a deposit, unlike a loan, there is no immediate obligation to repay. Normally a deposit is for a fixed tenure. In the present case, the amounts received by the assessee are as trade advances and there is no evidence that there was any stipulation as to the period or any stipulation for interest. It is therefore matter of grave doubt as to whether the amounts received from the parties can be characterized as loan or deposit. In our view, they are trade advances received for the purpose of supply of goods dealt by the assessee. Such trade advances cannot fall under the purview of section 269SS of the Act so as to attract penalty u/s. 271D of the Act. - Decided in favour of assessee.
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2019 (2) TMI 168
Treatment of undisclosed investment on purchase of property - as per assessee transactions are business transactions and the loss sustained by the assessee should be allowed - loss sustained should also be allowed to be carried forward u/s 71 - Held that:- We notice that the assessee had declared and accepted that the value of the property purchased by him from Mr. Jaipal Reddy was at ₹ 42.84 lakhs. At the same time, he claims that the above funds were arranged from the customers as advances. Since, assessee has not brought any cogent material in support of the above claim, we are inclined to determine the purchase cost of the property at ₹ 42.84 lakhs. Accordingly, ground No. 2 is rejected. Loss sustained should also be allowed to be carried forward u/s 71 - as considered the profit & loss statement drawn by the assessee. The assessee records the purchase cost as per the actual cost agreed with Mr. Jaipal Reddy but declared sales value as per the registered sale deed, thereby, declaring huge loss. We are also not in a position to accept since the purchase cost is declared on actual agreed price but the sales values are declared as per registered sale deed, which is not the actual sale price. Since, in this AY, AO has only made addition u/s 69, we can only adjudicate on this aspect. Since the assessee has accepted the purchase price and AO has made the addition u/s 69, we direct the AO to allow the assessee to declare the value of closing stock based on the purchase price. Since the cost of purchase is treated as investment in land, the assessee is allowed to carry forward the unsold value of land as closing stock as determined above. The assessee cannot treat the difference between purchase price and sales price as loss and is also not eligible to carry forward as business loss u/s 71. Accordingly, the grounds raised by the assessee on this issue are partly allowed.
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2019 (2) TMI 167
Penalty u/s 271(1)(b) - reopening of assessment - non comply with the notice issued u/s 142(1) - Held that:- We find that assessee during the assessment proceedings did not comply with the notice issued u/s 142(1) therefore, the authorities below have imposed penalty u/s 271(1)(b). We find that finally the assessee did appear during the assessment proceedings and assessment was completed u/s 147/143(3) of the Act. Under similar circumstances I.T.A.T. Lucknow Bench of the Tribunal in the case of Smt. Reeta Patel vs Income Tax Officer [2018 (1) TMI 1433 - ITAT LUCKNOW] assessee during the assessment proceedings did not comply with the notices issued u/s 142(1) on various dates which learned CIT(A) and Assessing Officer have noted in their order and therefore, the authorities below have imposed penalty u/s 271(1)(b). However, we find that finally the assessee did appear before the assessment proceedings and assessment was completed u/s 143(3) and thereafter, the matter travelled upto Tribunal, which vide order dated 30/01/2017 allowed the appeal of the assessee for statistical purposes. - Decided in favour of assessee.
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2019 (2) TMI 166
Addition u/s 69 as unexplained investments - non-declaration of agricultural income in the return of income - Held that:- It is an admitted fact that the assessee is owner of 8.50 acres of land. In all probabilities, the assessee would have earned agricultural income. The assessee has produced agreement dated 02.04.2009 to support the claim of receipt of agricultural income. By virtue of this agreement, the assessee was in receipt of ₹ 11,00,000. The agreement dated 02.04.2009 was not accepted by the CIT(A) since the assessee had not made out a case for exception to Rule 46A of the I.T.Rules, 1963. However, taking into the totality of circumstances of the case and that the assessee is the owner of the land to the extent of 8.50 acres, which is having rubber, coconut, pineapple plantation, cardamom plantation etc., the receipt of agricultural income cannot be totally ruled out. Therefore, on a fair estimation of agricultural income out of 8.50 acres of land, there could be receipt of agricultural income to the tune of ₹ 2 lakh. Direct the AO to grant further reduction of ₹ 2 lakh out of ₹ 5,64,012 and balance ₹ 3,64,012 alone should be brought to tax as an unexplained deposit in the hands of the assessee. It is ordered accordingly.
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2019 (2) TMI 165
Denial of claim for estimating income u/s 44AD on remuneration and interest received from firms - Claim of the assessee is that interest and salary received by him from firms in which, he was a partner had to be construed as business income by virtue of section 28(v) of the Act and hence assessee is eligible for applying presumptive interest rate under section 44AD - Held that:- Intention of the Section 40, in our opinion, is that partner should not be disentitled from claiming reasonable remuneration where he is a working partner and also should not be denied reasonable interest on the capital invested by him in a firm. If these charges are not made in the accounts of the firm, then pro-rata profits of the firm would be higher, resulting in higher taxes to the firm. The payments therefore have to be construed indirectly as a type of distribution of profits of a firm, for which otherwise, a firm would have been taxed. It seems that legislature in its wisdom chose such remuneration and interest to be a part of profits from business or profession. This by itself, in our opinion, would not translate such remuneration and interest, to gross receipts or turnover of a business of being partners in firms. In other words, it cannot be construed as gross receipts or turnover of a business independently carried on by a partner. Having a look section 44AD which was substituted by Finance (No.2) Act, 2009 with effect from 01.04.2011. Prior to this substitution, the said Section allowed application of presumptive tax rate only for business of civil construction or supply of labour for civil construction. Presumptive tax rate application was widened to include any business which had turnover or gross receipts of less than one crore through such substitution. In the Explanatory Notes to the provisions of Finance (No.2) Act,2009 vide Circular No.5/2010 dated 03.06.2010, CBDT has explained the reason for widening. It is clear from the reading of the above Explanatory Note, that the intention was to help small business to comply with the taxation provisions. Intention was not at all to construe a partner’s remuneration or interest as business income. - Decided against assessee.
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2019 (2) TMI 164
Assessment u/s 153C - recording of satisfaction note - Held that:- It is not in dispute that search was conducted in the cases of Shri B.K. Dhingra and Others on 20.10.2008 and during the course of search certain documents belonging to assessee were seized. Accordingly proceedings under section 153C were initiated by recording the satisfaction note Dated 08.09.2010 for assessment year under appeals i.e., 2003- 2004 to 2008-2009 (PB-1). It is also not in dispute that the search in the cases of Shri B.K. Dhingra and Others connected to cases were of M/s. RRJ Securities Ltd., and M/s. Sanchit Consultants Pvt. Ltd.. The ITAT, Delhi G-Bench, in the case of M/s. Sanchit Consultants Pvt. Ltd.[2018 (2) TMI 434 - ITAT DELHI], following the decision of RRJ Securities Ltd. [2015 (11) TMI 19 - DELHI HIGH COURT], on identical facts concluded that the assessments made by the A.O. under section 153C of the I.T. Act for A.Ys. 2003- 2004 and 2004-2005 are beyond the scope of Section 153C and the same being void abinitio, deserves to be quashed. - Decided in favour of assessee.
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2019 (2) TMI 163
TPA - Comparable selection - excluding seven comparables on the ground that all of them are government companies and are, therefore, not good comparables- Held that:- The assessee company is engaged in providing design and engineering services property, environment, transport and infrastructure sectors. The assessee provides services to transform the built environment and restore the natural environment and its expertise ranges from environmental remediation to urban planning from engineering iconic buildings to designing sustainable transport networks and from developing the energy sources of the future to enabling new ways to extracting essential resources. Companies whose most of the Revenue comes from government and functions performed are also not comparable with that of the assessee exclusion is upheld.
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2019 (2) TMI 162
Calculation of the short term capital gains / short term capital loss - Consolidated computation - invoking the provisions of the section 55A of the Act for the purpose of valuing the cost of acquisition of the property - Held that:- The assessee having sold a single land and building it is not open to the Revenue to break up the transaction and to determine the short term capital gains in respect of the transactions separately. If that is to be done, AO having determined the short term capital gains in respect of land at ₹ 21,75,080/-, would also have to determine the short term capital gains /short term capital loss in respect of the building being [ ₹ 50 lakhs minus ₹ 26,00,180/- = ₹ 23,99,820/- being the value of the building sold; Therefore ₹ 45,60,000 minus ₹ 23,99,820/- = ₹ 21,60,180/- being the capital loss in respect of the building.] The net result would short term capital gains in respect of land at ₹ 21,75,080/- and the short term capital loss in respect of the building at ₹ 21,60,180/-, thereby giving rise to short term capital gains of ₹ 14,900/-. However the original assessment order passed u/s.143(3) of the Act has already determined the short term capital gains of ₹ 3,20,000/-, which would have to be set off, thereby total short term capital loss of ₹ 3,05,100/- would result. This being so, the ld. Assessing Officer is directed to re-compute the short term capital gains / short term capital loss in respect of both the land and building in a consolidated manner and not independently in so far as the property sold is a land and building and both are short term capital assets. - Appeal of the assessee is partly allowed for statistical purposes.
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2019 (2) TMI 161
Addition of bogus purchases - rectification of mistake - information from the Sales Tax Department regarding the bogus purchase being from hawala traders - Held that:- We find that the ITAT have gone through the order of the A.O. and the ld. CIT(A) and all the facts on record. In the facts and circumstances of the case, despite noting the decision of the Hon’ble Apex Court wherein 100% bogus purchase was confirmed, the tribunal has proceeded to grant relief of 12.5% as against 25% addition sustained by the ld. CIT(A). There is no mistake apparent from the record in the order of the Tribunal as raised by the assessee. We are of the opinion that what the assessee is seeking is a review of the order which is not permissible in the law. None of the issues raised by the assessee in the miscellaneous applications can be termed as mistake apparent from record. Issues which can be taken up u/s.254(2) of the ITAT have to be obvious and patent mistake and not something which can be established by a process of arguments and reasoning. Further on the same basis, an error in judgment also cannot be taken up as mistake apparent from record liable for rectification u/s. 254(2). Accordingly, in the background of aforesaid discussion, we find that the issue raised in the miscellaneous application cannot be a subject matter of rectification of mistake apparent from record.
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2019 (2) TMI 160
Rectification of mistake with regard to reopening - assessee submitted that ITAT has erred inasmuch as it has not upheld the proposition that the A.O. should have conclusively prove in the reasons recorded that there was escapement of income - Held that:- All the issues raised in these miscellaneous applications have been considered by the Tribunal. As regards the issue on non consideration of the valuation report submitted by the assessee is concerned, we note that the same was duly considered and found to be not acceptable. Further, all the issue on merits referred above has been duly answered in the order by the ITAT. As regards the submission regarding reliance by the ITAT on the statement of Denzil D'Souza, it is found that nowhere in its order on adjudication of the merits, the ITAT has relied upon its statement of Denzil D'Souza. It is the matter of fact that the CIT(A) in his order reproduced in the ITAT order has referred that a copy of the statement of Denzil D'Souza was duly given to the assessee and that the statement given by Denzil D'Souza was just an affirmation of what had already gathered by the A.O. from the facts on record. As regards the alternative claim of the assessee, it is noted that the Tribunal has duly considered the same. As noted that except for making the claim, no detail has been furnished whatsoever by the ld. Counsel of the assessee as to how the receipt from the arbitration award amount to a family settlement. That there is no mention whatsoever in the arbitration award as to how the said amount has been determined or that it is a family arrangement. That in the absence of any detail thereof, the amount received cannot be held to be a receipt on account of family arrangements. Thus, we find that the Tribunal has considered all the arguments and passed the order. What the assessee is seeking is a review of the order which is not permissible in the law. None of the issues raised by the assessee in the miscellaneous applications can be termed as mistake apparent from record. Issues which can be taken up u/s.254(2) of the ITAT have to be obvious and patent mistake and not something which can be established by a process of arguments and reasoning. Further on the same basis, an error in judgment also cannot be taken up as mistake apparent from record liable for rectification u/s. 254(2). - Decided against assessee.
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2019 (2) TMI 159
Addition u/s 68 - bogus Long Term Capital Gains on purchase and sale of the shares - exemption made u/s 10(38) denied - Held that:- AO has not assessed this amount as ‘Business Income’. As bound to follow the judgment of the Jurisdictional High Court in this matter. As find that the assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court , (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. - Delete the addition made u/s 68 of the Act, on account of Long Term Capital Gains. - Decided in favour of assessee.
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2019 (2) TMI 158
Late fee u/s 234E in intimation u/s 200A - jurisdiction of AO to levy the fees - assessee has defaulted in furnishing the TDS statement - Held that:- AO has acquired the jurisdiction to levy the fees as on 1.06.2015 and therefore, any return filed and processed after 1.6.2015 will fall within his jurisdiction where on occurrence of any default on part of the assessee, he can levy fee so mandated u/s 234E of the Act. Therefore, irrespective of the period to which the quarterly return pertains, where the return is filed after 1.6.2015, the AO can levy fee under section 234E of the Act. In terms of determining the period for which fees can be levied, only saving could be that for the period of delay falling prior to 1.06.2015, there could not be any levy of fees as the assumption of jurisdiction to levy such fees have been held by the Courts to be prospective in nature. However, where the delay continues beyond 1.06.2015, the AO is well within his jurisdiction to levy fees under section 234E for the period starting 1.06.2015 to the date of actual filing of the TDS return. In light of the same, in the instant case, the levy of fees under section 234E is upheld for the period 1.06.2015 to the date of actual filing of the TDS return which is 12.09.2015 and the balance fee so levied is hereby deleted. - Decided partly in favour of assessee.
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2019 (2) TMI 157
Penalty levied u/s 271B - treatment of unaccounted sale as the turnover - requirement of audit of the books of account as per Section 44AB - Held that:- Addition made by the AO during the assessment proceedings on the basis of unaccounted sale cannot be regarded as the turnover for the purpose of Section 44AB of the act because the documents relied upon by the A.O. are neither the part of books of account nor would substitute the books of account or constitute the books of account of the assessee regularly maintained. Therefore, the books of account maintained by the assessee in regular course of business cannot be substituted by the material gathered by the AO in the course of some survey in the case of third party though the said material may be relevant evidence for making the addition to the income of the assessee. Following the earlier decision of this Tribunal, the penalty levied U/s 271B of the Act is deleted. - Decided in favour of assessee.
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2019 (2) TMI 156
Penalty levied u/s.271(1)(c) - defective notice - whether AO has initiated penalty proceedings for concealment of particulars of income or for furnished inaccurate particulars? - Held that:- Validity of a notices issued under Section 274 r.w.s. 271 of the Act goes to the root of the jurisdiction to levy a penalty under Section 271 (1) (c) of the Act and can therefore be considered at any stage of the appellate proceedings. Notice issued to the assessee under these Sections, for all the years are typically worded for both the assessees and that for assessment year 2006-07. Guilty of both concealment of income as well as furnishing of inaccurate particulars of income. However, a reading of the above notice clearly show that the word used for linking the two portions is "or" and not "and". An assessee in our opinion has every right to know which alleged default he has to explain. If it is both, it is necessary to mention so, in the notice. Without knowing what is default for which he is being charged, an assessee cannot give explanation. Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.
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2019 (2) TMI 155
Condonation of delay - delay of 2969 days - no satisfaction note was recorded by the AO at the time of issue of notice u/s.153C - Held that:- In the present case, it is a case of the assessee that no satisfaction note was recorded by the AO at the time of issue of notice u/s.153C. Now, it is settled principle of law that recording of satisfaction by the AO at the time of issuance of notice u/s.153C is a sine qua non for getting jurisdiction over the seized documents. In case, a satisfaction note was not recorded, the AO would not get jurisdiction for the seized materials received by him. This position of law was explained by the Hon’ble Apex Court in the context of provision of Sec.158BD of the Act in the case of CIT v. Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT]. The CBDT vide its Circular No.24/2015 dated 31.12.2015 accepted that the same position holds good even in the context of provisions of Sec.153C of Act. In the present case, the appellant had filed the copies of ordersheet entries of AO indicating that no satisfaction note was recorded by the Assessing Officer. Even the CIT(DR) also filed copies of the ordersheet entries, wherein, no satisfaction note was recorded. Therefore, this material conclusively established that the Assessing Officer has no jurisdiction to proceed against the appellant under the provisions of Sec.153C of the Act. Thus, in the interest of advancing substantial justice to the appellant, the delay of 2969 days can be condoned accordingly. Jurisdiction of AO u/s.153C - no satisfaction note was recorded by the AO as well as the Assessing Officer of searched person saying that the incriminating material belonging to the appellant were found during the course of search and seizure proceedings in the case of Shri D. Mayandi & others - Held that:- We must mention here that though the Ld.CIT(DR) in his covering letter had stated that copy of the satisfaction note is furnished, in fact, what is furnished is only a copies of ordersheet entries of Assessing Officer which are same as furnished by the appellant. Therefore, keeping in view the CBDT Circular No.24/2015 dated 31.12.2015 and the judgment of the Hon’ble Supreme Court in the case of Calcutta Knitwears, supra, in the absence of such satisfaction note recorded by the Assessing Officer, the Assessment Order passed is null and void ab initio and accordingly, we hold that the Assessment Orders passed cannot be sustained in the eyes of law. - Decided in favour of assessee.
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2019 (2) TMI 154
Validity of reopening of assessment - non application of mind by the competent authority while recording satisfaction u/s 151 - reasons to believe - Held that:- The note of satisfaction recorded by the AO in the reasons is based on the information received from the director of investigation wing and the AO without making any effort to examine and discuss the material received from the Investigation Wing with the support of tangible material gathered by way of conducting inquiry shall be held as without application of the mind since, he has used the same to form reason to believe that income had escaped assessment. AO proceeded to initiate reassessment proceedings on the basis of borrowed satisfaction without any application of mind and exercise on the information received from the Investigation Wing of the Department. Therefore, no hesitation to hold that the AO proceeded to initiate reassessment proceedings u/s. 147 and to issue notice u/s. 148 on the basis of borrowed satisfaction and without any application of mind and examination of the so called material and information received from the investigation wing to establish any nexus, even prima facie, with the such information. Initiation of reassessment proceedings u/s. 147 notice u/s. 148 reassessment proceedings and all consequent proceeding and orders, including impugned reassessment and first appellate order, are bad in law and thus, not sustainable and we hold so. - Decided in favour of assessee.
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2019 (2) TMI 153
TDS u/s 194C - reimbursement of expenses as claimed to be on account of payment of freight, cartage, conveyance, telephone etc. - Held that:- Assessee earned the commission income from M/s Unifruitti India (P) Ltd. and also received the expenses which were incurred by it for the said company. In this regard, the company M/s Unifruitti India (P) Ltd. furnished a certificate. The said certificate was not produced before the AO, however, the assessee furnished the same before the CIT(A) who admitted the said fact and also mentioned that the said certificate was undated but the facts mentioned in the said certificate resembled with the details furnished by the assessee. The figure of the Tax Deducted at source u/s 194C on the said expenses was same which was in the TDS certificate and the amount of reimbursement of expenses was claimed to be on account of payment of freight, cartage, conveyance, telephone etc. The assessee also furnished the details of the expenses reimbursed by M/s Unifruitti India (P) Ltd.. In our opinion, the reimbursement of expenses cannot be considered as the income of the assessee. The assessee was earning commission income as well as incurring the expenses on behalf of M/s Unifruitti India (P) Ltd. Those expenses incurred by the assessee were reimbursed by the said company, therefore, the reimbursed expenses cannot be considered as income of the assessee. In that view of the matter, we delete the impugned addition sustained by the ld. CIT(A). - Decided in favour of assessee.
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2019 (2) TMI 152
Denial of exemption claimed by the assessee u/s 54 - non-deposit of capital gain in the Capital Gain Account within the due date - Held that:- The provisions of Income-tax Act very clearly says that in case the capital gain was not invested, it has to be deposited in a specific account within the due date for filing return of income. The due date of 31.07.2012 was further extended to 31.08.2012 by CBDT. Therefore, the assessee had to deposit the money on or before 31st August, 2012. In this case, the assessee admittedly deposited the amount on 27.08.2012. Therefore, there cannot be any disallowance on this ground. Now coming to completion of building, this Tribunal is of the considered opinion that what is contemplated in the provisions of Income-tax Act for claiming exemption under Section 54 of the Act is investment of funds for the purpose of construction. The moment assessee invested the entire capital gain for the purpose of purchasing a residential house or construction of residential house, the condition stipulated in the provisions to claim exemption is satisfied, therefore, the Assessing Officer cannot disallow the claim of the assessee. Assessing Officer is not disputing the fact that the assessee has invested the funds. What is disputed is that the construction was not completed. In view of judgment of Madras High Court in Sardarmal Kothari (2008 (6) TMI 15 - MADRAS HIGH COURT and Mrs. Seetha Subramanian (1996 (4) TMI 164 - ITAT MADRAS-C) and the CBDT circular No.471 dated 15th October, 1986 and in No.672 dated 16th December, 1993, mere investment of the capital gain in the construction of residential premises is more than sufficient for claiming exemption under Section 54 of the Act. Therefore, in the second ground of disallowance also, the Assessing Officer fails. CIT(Appeals) rejected the claim of the assessee on the ground that it is not fit for human habitation. Since the construction was admittedly in progress, it may not be fit for human habitation as claimed by the Revenue authorities. But, the fact is that the assessee has invested the entire capital gain in purchasing the land and to construct the building, which is not in dispute. CIT(Appeals) rejected the claim of the assessee on the ground that it is not fit for human habitation. Since the construction was admittedly in progress, it may not be fit for human habitation as claimed by the Revenue authorities. But, the fact is that the assessee has invested the entire capital gain in purchasing the land and to construct the building, which is not in dispute. - Decided in favour of assessee.
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2019 (2) TMI 151
Levy of penalty u/s 272A(1)(c) - summons u/s 131(1A) were issued to the assessee in connection with proceedings before the DDIT (Intelligence & Criminal Investigation), Jaipur - no compliance on behalf of the assessee to such summons - no reasonable cause for non-compliance to the notice issued u/s 133(6) - Held that:- No infirmity in the order of ld. CIT(A) as the assessee has consistently failed in compliance not with the summons issued under section u/s 131(1A) and notice seeking under information under section 133(6) of the Act but thereafter not coming forward even during the course of penalty proceedings where specific opportunity was provided to the assessee to show any reasonable cause for noncompliance to the summons. In light of the same and in absence of any reasonable cause been shown by the assessee, the penalty so levied u/s 272A(1)(c) and section 272A(2)(c) is hereby confirmed. - Decided against assessee.
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2019 (2) TMI 150
Reopening of assessment - addition u/s 68 - reason to believe escapement of income - Held that:- As regards non-compliance of section 151(2) of the Act, we find that the Assessing Officer has taken requisite sanction from the competent authority to issue notice u/s. 148, which is placed at record. As regards the satisfaction of the AO, after taking steps to verify the cash deposit, in which the assessee did not cooperate, and after recording the reason to believe, the Assessing Officer has categorically mentioned in the reasons recorded that “I, therefore, consider that it is a fit case for issue of notice u/s. 148 The assessee has miserably failed to discharge the onus that lay on her by section 68 of the Act. The creditworthiness of the creditors does not stand proved by any cogent evidence on record. Mere bald statements of Gopal Gautam that he deposited the sum of ₹ 5 lakhs to the account of assessee after getting the amount from his father or mother, is not supported by any corroborative evidence and no proof of creditworthiness of other two creditors is also available on record. In presence of all these peculiar facts and circumstances of the present case, the decisions relied by the assessee in several cases have rightly not been considered as relevant to the case of assessee. We also do not find any credible material on record from the side of assessee to discard the findings reached by the ld. Authorities below. - Decided against assessee
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2019 (2) TMI 127
Penalty issued u/s 271(1)(c) - assessee has not offered any explanation to the satisfaction of the AO - Held that:- Merely because the assessee agreed for addition and accordingly, assessment order was passed on the basis of addition and when the assessee paid the tax and the interest thereof in the absence of any material on record to show the concealment of income, it cannot be inferred that the said addition is on account of concealment, so as to levy penalty under Section 271(1)(c) of the Act. We find no error in the order passed by the Tribunal especially when it is admitted that the decision in C.I.T. Vs. Manjunatha Cotton and Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) has attained finality. - Decided against the Revenue and in favour of the assessee
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Customs
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2019 (2) TMI 149
Classification of imported goods - E-Rikshaws - petitioner disputes that the E-rickshaw parts can be considered as Motor Vehicles under Rule 126 of the Central Motor Vehicles Rules, 1989 - whether the Customs Authorities are justified in withholding the consignment of parts of E-Rikshaws on account of non-production of a Type Certificate as required under Rule 126 of the Central Motor Vehicles Rules, 1989? Held that:- Undoubtedly, the three parts (rear axle, motor and controller) imported by the petitioner are key essential parts for assembling an E-Rickshaw. The cumulative value of these three parts also constitutes a substantial value of an E-Rickshaw. However, it is not disputed that these three parts do not by themselves constitute the complete product (E-Rickshaw). There are, undisputedly, several other parts that are required to be assembled along with the three parts (rear axle, motor and controller) imported by the petitioner to produce an E-Rickshaw. In this view, it is difficult to accept that these parts imported by the petitioner could be construed as a motor vehicle for the purposes of the Motor Vehicles Act, 1988 or the Rules made thereunder. A motor vehicle is a contraption that can be used on roads. E-Rickshaw is clearly a motor vehicle; but the three parts in question, even though being substantial components of an E-Rickshaw, cannot be termed as motor vehicle within the meaning of Section 2 (28) of the Motor Vehicles Act. The petitioner does not dispute that in view of the interpretation as per scope of Rule 2(a) of the Interpretative Rules, the components imported by it are required to bear the same duty as applicable to an E-Rickshaw. The legal fiction as enacted under Rule 2(a) of the Interpretative Rules that is treating incomplete and unfinished articles as complete articles is only for the purposes of interpretation of the First Schedule of the Custom Tariff Act, 1975. This legal fiction cannot be extended beyond the purpose for which it was enacted. Plainly, by applying the legal fiction of Rule 2(a) of the Interpretative Rules, the components would not, by fiction, become complete motor vehicles for other purposes. The legal fiction enacted for purposes of interpreting the duties under the Custom Tariff Act, 1975 cannot be extended to treat the essential parts of a motor vehicle as a mechanically propelled vehicle adapted for use upon roads. It is well settled that legal fictions created by a statute cannot be extended beyond the purpose for which they are so created. While Rule 2(a) of the Interpretative Rules can be applied for treating the import of goods as an import of a complete E-Rickshaw for the purposes of the Customs Tariff Act, 1975, that is, for determining the applicable duties and tariffs, the said rule will have no application for treating the said goods as a complete E-Rickshaw under any other statute including the Motor Vehicles Act, 1988 and the Central Motor Vehicle Rules, 1989. Clearly, there is no scope for the specified organizations to grant a type approval only on the essential parts of an E-Rickshaw - If the contention as advanced by the respondents is accepted, it would mean that no person other than a manufacturer of an E-Rickshaw can import the essential components/assemblies of an E-Rickshaw. This is unpersuasive and cannot be accepted. The respondents are directed to clear the goods in question on payment of the duties as applicable to import of an E-Rickshaw - the respondents cannot withhold the goods for want of a type approval under Rule 126 of the Central Motor Vehicles Rules, 1989 - petition allowed.
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2019 (2) TMI 148
Exemption to Additional Customs Duty on Aviation Turbine Fuel (ATF) as availabale to Basis Customs Duty - benefit of N/N. 21/2002-CUS dated 01.03.2002 S.No. 77C - interpretation of statute - Held that:- A plain reading of the notification does not suggest that the intention is to extend the same benefit to the Additional Duty of Customs as is available to the Basic Customs Duty and there is no such indication in the notification. General Rules of Interpretation cannot at all be used to interpret exemption notification - Further, the explanatory note in question refers to Column No.4 (Standard Rate) and Column No.5 (Preferential Rate) of the Tariff whereas Column No.4 in the notification refers to the Basic Customs Duty and Column No.5 refers to the Additional Duty of Customs. Simply because the column numbers are the same, the notes meant for the Tariff cannot be applied to the exemption notification. Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 147
Classification of imported goods - Raw Jute cutting grade imported by the appellant from Bangladesh through LCS Petrapole - whether classified under under Tariff Heading 53039010 or under Tariff subheading 530310.10 of CTA ’75? - benefit of N/N. 21/02-Cus dated 01.03.2002 read with SAPTA N/N. 105/99 Cus dated 08.10.2005. Held that:- The present issue is no more res-integra in view of the order passed by this Tribunal in the case of Naffar Chandra Jute Mills Ltd. [2014 (8) TMI 282 - CESTAT KOLKATA], where it was held that Goods imported by the Appellant, be considered as raw jute of cutting grade, therefore the benefit of the said Notification automatically flows as it continued to be applicable to raw jute only. The appellant has appropriately classified the imported goods i.e. raw jute cutting grade under Tariff Heading 53039010 of the Customs Tariff Act, 1975 and has rightly claimed the benefit of N/N. 21/2002-Cus dt.01.03.2002 and N/N. 105/99-Cus dt.10.05.1999 - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2019 (2) TMI 146
Rejection of resolution plan submitted by the 3rd Respondent–‘Rajasthan Liquor Ltd.’ - Held that:- The Resolution Professional has filed a report enclosing a copy of the modified resolution plan submitted by the 3rd Respondent. It is informed that all the Financial Creditors have been treated equally. Similarly, all the Operational Creditors have also been treated equally. No discrimination has been made between one or other Financial Creditor. Similarly, No discrimination has been made between one or other Operational Creditor. The Resolution Professional to place the modified resolution plan of the 3rd Respondent before the Committee of Creditors for its approval within fifteen days and Committee of Creditors in its turn will consider the viability, feasibility and financial matrix of the modified resolution plan submitted by the 3rd Respondent–‘Rajasthan Liquor Ltd’ and vote accordingly. While exercising voting share, the Committee of Creditors shall keep in mind that the earlier resolution plan was approved by them. Appeal disposed off.
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Service Tax
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2019 (2) TMI 145
Application for early hearing - Held that:- List the appeal in the month of July, 2019 before the appropriate Bench - application disposed off.
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2019 (2) TMI 144
Attachment of petitioner's Bank Account - Section 87(b)(i) of the Finance Act, 1994 - Held that:- Identical issue decided in the case of M.P. ENTERPRISES VERSUS THE UNION OF INDIA & OTHERS. [2018 (9) TMI 1520 - BOMBAY HIGH COURT], where it was held that Section 87 of the Act, can only be invoked for adopting coercive proceedings for recovery after the authorities determined the amount payable by an assesee on an adjudication order. Without adjudication, no steps for coercive recovery under Section 87 of the Act can be taken by the authorities - the impugned notice dated 30th August, 2018 issued to Union Bank of India and Axis Bank, attaching the Petitioner’s Bank Account - petition disposed off.
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2019 (2) TMI 143
Business Auxiliary Services - amount collected as co-loaders from other courier agencies - Held that:- This issue is no longer res integra and it has been settled by the hands of Tribunal in the case of United Business Xpress India Pvt. Ltd. [2016 (12) TMI 440 - CESTAT NEW DELHI], where it was held that The transaction between the appellant and the other courier agency is on principal to principal basis. It cannot be said that the service has been rendered on behalf of the courier agency. Consequently, activity cannot be covered under the definition of BAS. These services are not chargeable under the head of Business Auxiliary services - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 142
Construction of Residential Complex Service - composite contracts - period 01.04.2006 to 30.06.2008 - demand of service tax - Held that:- The period involved is from 01.04.2006 to 30.06.2008. undisputedly, the works executed or the contracts entered are of composite in nature as it involves supply of materials as well as element of services - The Hon'ble apex court in the case of M/s. Larsen & Touboro Ltd., [2015 (8) TMI 749 - SUPREME COURT] has held that such contracts which are composite in nature are not leviable to service tax prior to 01.06.2007 - the demand prior to 01.06.2007 cannot sustain. The part of the demand falls after 01.06.2007 and the demand has been made under construction of complex Service, The Tribunal in the case of M/s. Real Value pronoters Pvt. Ltd., [2018 (9) TMI 1149 - CESTAT CHENNAI] had discussed in detail the leviability of service tax on composite contracts under the category of CCS/CICS/ECIS for the period after 01.06.2007. The Tribunal therein had observed that after 01.06.2007, the demand for such composite contracts can attract the levy of service tax under the category of Works Contract Services only. The demand prior to 01.06.2007 or after cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 141
Works Contract Service - composition scheme - Department was of the view that the appellant is not eligible for abatement as per N/N. 7/2006 since they have availed Cenvat credit on input services - period involved is from Apr.'07 to Mar.'11 - Held that:- Undisputedly, the works executed or the contracts entered are of composite in nature as it involves supply of materials as well as element of services - The Hon'ble apex court in the case of M/s. Larsen & Touboro Ltd., [2015 (8) TMI 749 - SUPREME COURT] has held that such contracts which are composite in nature are not leviable to service tax prior to 01 .06.2007. Following the same, the demand prior to 01.06.2007 cannot Sustain and requires to be set aside. The Tribunal in the case of M/s. Real Value Promoters Pvt. Ltd., [2018 (9) TMI 1149 - CESTAT CHENNAI] had discussed in detail the leviability of service tax on composite contracts under the category of CCS/CICS/ECIS for the period after 01.06.2007. The Tribunal therein had observed that after 01.06.2007, the demand for such composite contracts can attract the levy of service tax under the category of Works Contract Services only. The demand prior to 01.06.2007 or after cannot sustain - Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 140
Construction of Complex services - period 2005-06 to 2008-09 - demand of service tax - Held that:- Undisputedly the contracts / works contract accepted by the appellants during the disputed period are of composite contracts involving both sides of materials and services. The Hon’ble Apex court in the case of Larsen and Toubro [2015 (8) TMI 749 - SUPREME COURT] has held that prior to 1/6/2007 such composite contracts cannot be subject to levy of service tax. After the said period, the tribunal in the case of Real Value promoters pvt Ltd [2018 (9) TMI 1149 - CESTAT CHENNAI] has held that the demand of service tax for composite contracts after 1/6/2007 can be only under works contract services, and cannot be demanded under CICS/ccs etc. Demand do not sustain - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 139
Levy of service tax - reimbursement of fixed expenses - taxable service of commission agent falling under the category of Business Auxiliary service provided - Held that:- The issue has already been decided in favor of the assessee in the Tribunal's decision Jayem Impex Pvt. Ltd. Vs CST Chennai [2018 (8) TMI 1514 - CESTAT CHENNAI], where it was held that such reimbursable cost shall not form part of valuation of taxable services prior to 14.05.2015 - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (2) TMI 138
Requirement of Additional pre-deposit on second appeal - Section 35F of the CEA 1944 - Held that:- There is no reason to entertain this petition - SLP dismissed.
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2019 (2) TMI 137
Amount paid on direction of Department - Whether the amount paid by the appellant as duty at the insistence of the department can be considered as payment under duress as has been claimed by the appellant? - Held that:- There was no evidence to the effect the assessee was coerced into paying the amounts, the amounts were paid voluntarily and not under coercion. Whether the amount paid by the appellant without receiving demand notice under Sec.11A can be considered as payment under Sec.11A(2B) as voluntary payment during the relevant period? - Whether any interest under Section 11AB is payable on the amount so paid? - Held that:- Evidently in this case, the assessee paid amount as determined by the Central Excise Officer voluntarily and has informed the department. However, they have not paid any interest. The period in question extends beyond the normal period of one year and hence demand could have been issued under Section 11A without invoking extended period of limitation. Further, they have not paid any interest on the amount paid - Therefore, all conditions of Section 11A(2B) have not been fulfilled and therefore, the payment cannot be said to be payment under Section 11A(2B). If the payment is not under Section 11A(2B) the demand of interest under Section 11AB as per the explanation (2) to Section 11A(2B) does not apply - The appellant had paid duty without any coercion but had not fulfilled all the conditions laid down under Sec.11A(2B) of Customs Act. Any refund claim needs to be decided on merits as per Section 11B. Refund claim - no SCN issued - Whether the assessee is entitled to refund of the amount paid by them on the ground that no SCN has been issued to them? - Held that:- The first appellate authority has adequately considered the demand for refund on merits and has held against the assessee and we find no reason to interfere with such a reasoned order. Appeal allowed in part.
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2019 (2) TMI 136
Benefit of reduced penalty of 25% u/s 11AC - SSI Exemption in respect of Unit–I - crossing of threshold limit - Held that:- The said request of the appellant is legal and proper for the reason that the adjudicating authority ought to have given the option to pay the reduced penalty of 25% under section 11AC. Thus, the impugned order stands modified to the extent of granting the option to pay reduced penalty of 25% of the duty amount only. Demand of duty in respect of Unit–II is ₹ 2,68,455/- - period 1997–98 - benefit of SSI exemption - Held that:- The appellant is eligible for the SSI benefit under Notification 38/97. It is also to be noted that the adjudicating authority for the period 1996 – 97 has excluded the value of ₹ 84,585/- and thus the turnover for the year 1996 – 97 which is the preceding financial year would be less than ₹ 300 lakhs. Therefore, the appellant in Unit II would be rightly eligible for notification 38/97 - The demand for this period which is ₹ 1,54,519/- is therefore set aside along with the penalties. However, since the appellant is not contesting the duty liability and the penalty for the period prior to 1997 – 98, in respect of Unit – II, the same does not require interference. Appeal allowed in part.
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2019 (2) TMI 135
CENVAT Credit - input services - Labour Charges - Testing Charges - Technical Inspection Charges - Payroll Processing outsourced to the external agency - Technical, Testing and Analysis Services - denial on account of nexus. Payroll Processing services - Held that:- The Payroll Processing to be integrally connected to the business and hence allowed the credit on the same - credit allowed. Labour Charges - Testing, Technical Inspection - Technical Analysis Service - Held that:- There is no dispute on eligibility and the disallowance of Credit was only for want of necessary documentary evidences, which have now been duly furnished and annexed herein by the appellant - The matter is required to be sent back to the file of the adjudicating authority for verification of the documentary evidences on the issue of Labour Charges, Testing Charges and Technical Inspection Charges and thereafter, pass a de novo adjudication Order - matter on remand for re-verification. Appeal allowed in part and part matter on remand.
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CST, VAT & Sales Tax
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2019 (2) TMI 134
Levy of tax on sale - transfer of right to use the goods - lease rentals - revision is been filed on various substantial questions of law - Held that:- Appeal is admitted - Issue notice on the aforesaid substantial questions of law. The revisionist has made out a prima facie case for grant of interim order. List this revision along with the service report of notice upon the opposite party.
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2019 (2) TMI 133
Interpretation of statute - date on which amendment coming into effect - Payment of tax at compounded rates - turnover tax on foreign liquor - interpretation of clauses a and b of Section 7 of the Kerala General Sales Tax Act, 1963 - context of the words “whichever is higher” at the end of clause (b) being added in the midst of the financial year - whether the amendment is to be applied from the commencement of financial year or from the date when it got introduced? Held that:- The issue is no longer res integra, the same having been decided by a Division Bench of this Court reported in Hotel Alakananda v. Commercial Tax Officer [2018 (1) TMI 1434 - KERALA HIGH COURT] - Going by the aforesaid decision, the amendment can be applied from the commencement of the financial year and the compounded tax has to be the higher of clause (a) or (b) of Section 7 - petition dismissed.
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2019 (2) TMI 132
Valuation - inclusion of discount in assessable value - application of Explanation VII to Section 2(lii) - addition of discount for purpose of computing of turnover - estimation of sales turnover at 3.12% gross profit. Whether the Tribunal was correct in having applied Explanation VII to Section 2(lii) and added on the discount for the purpose of computing the turnover? - Held that:- As far as the Explanation VII to Section 2(lii) of the Act, the issue stands covered by a judgment of a Division Bench of this Court in State of Kerala v. Syed Muhammed [2016 (10) TMI 1023 - KERALA HIGH COURT]. Therein also the assessee having suffered loss received some amounts from the suppliers for the purpose of recouping the loss suffered by it. Based on Explanation VII to Section 2(1ii) the amount transferred to recoup the loss was included in the turnover - the first question in favor of the Revenue and against the assessee. Whether the lower authorities were correct in having estimated the sales turnover at 3.12% gross profit and added on the discount for the purpose of computing the taxable turnover? - Held that:- There has been double taxation effected by application of Explanation VII to Section 2(lii). The actual purchase price by adding on the duty wages and loading and unloading charges was found to be ₹ 1,14,88,348/-. An estimate was made of the total taxable turnover @ 3.12% G.P. and the figure arrived at was ₹ 1,18,46,786/-. Hence the sale price was in excess of the purchase price. In that context, there was no requirement for an addition of the discount applying Explanation VII to Section 2(lii). Either the Assessing Officer could have added on the discount to the returned turnover or taxed the estimated turnover adding G.P. When the sales turnover is estimated after computing the G.P then necessarily the entire turnover is taxed - There cannot be an exercise made of applying gross profit and then addition of the discount amounts; in which event there would be double taxation on the estimated component. The estimation made with G.P. @3.12% is sustained and the Assessing Officer is directed to adopt the taxable turnover at ₹ 1,18,36,786/- after including the estimation with respect to the other suppression - the question in favor of the assessee and against the Revenue. Appeal allowed in part.
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2019 (2) TMI 131
Maintainability of petition - availability of statutory remedy - validity of reassessment order - Held that:- Since efficacious remedy by way of revision/ appeal is available to the petitioner against the order under challenge, under the Jharkhand Value Added Tax, 2005, there is no reason to entertain this Writ Petition - petition disposed off.
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2019 (2) TMI 130
Levy of sales tax - sale of 43,554 colour television sets by the petitioner - Benefit of an exemption under the scheme of free disbursement of the said sets to the families who did not own the colour television sets. But 43,554 colour television sets lifted from the petitioner's godown after 01.03.2011 were distributed not among the families who did not own the colour television sets, but only to various Government departments. Held that:- The notification issued vide G.O.Ms.No.120 Commercial Taxes and Registration(B2) Department, dated 06.10.2006, will continue to apply notwithstanding the change in the end user. Petition allowed - decided in favor of petitioner.
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2019 (2) TMI 129
Principles of natural justice - validity of assessment order - it is the case of petitioner is that the reply submitted by the petitioner dated 17.09.2018 was not considered or taken into account by the Assessing Officer before passing the impugned orders of assessment on 28.09.2018 - Held that:- This Court at this stage is not expressing any view on the merits of the assessment, since the only ground on which, those orders are sought to be challenged is in violation of principles of natural justice. Therefore, this Court has to consider as to whether such violation has taken place or not. This Court is inclined to grant one more opportunity to the petitioner to put forth their case before the Assessing Officer, however, subject to the condition that the petitioner pays 10% of the tax liability so as to show their bona fide for the purpose of making the assessment orders afresh, on merits and in accordance with law - matter is remitted back to the Assessing Officer - Petition allowed by way of remand.
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2019 (2) TMI 128
Classification of supply - stock transfer or inter-state sale? - issuance of Form ‘VI-B’ / Form F under the CST Act - case of the Revenue is that the business audit conducted at the appellant’s business premises between 06.05.2008 to 08.05.2008 disclosed facts adverse to the appellant - Held that:- It is clear from the show cause notice that it is based on goods sold to M/s Omni Auto Ltd. in March 2008. It is clearly stated that all the goods dispatched to the branch during this period have been sold to only one purchaser namely, M/s Omni Auto Ltd. The show cause notice clearly mentions that on the basis of material submitted by the appellant it can be inferred that the dispatches are as per the pre-existing order received from M/s Omni Auto Ltd. When the show cause notice is based entirely on the sale to one purchaser namely, M/s Omni Auto Ltd. it is not understood why the reasons given in the assessment order do not even mention M/s Omni Auto Ltd. The assessment order is blissfully silent about any sales to M/s Omni Auto Ltd. No doubt, it is the case of the Revenue that the appellant was asked to produce the purchase order for the year 2007-08, but the appellant did not produce any purchase order. The appellant should have produced purchase orders if they were in existence. But for that reason the Assessing Authority could not have used purchase order of Tata Steel to come to a conclusion that the branch transfer claim made by the appellant deserves to be rejected - Without even referring to M/s Omni Auto Ltd., the Assessing Authority has stated that it has considered the dispatch proof, consignment notes, F forms etc. produced by the appellant and after verification it has come to the conclusion that in spite of production of F forms, the claim of branch transfer is not allowable. Whether all this material was with respect to transactions with M/s Omni Auto Ltd. is not clear, because there is no reference to M/s Omni Auto Ltd.. It was necessary for the Assessing Authority to first lay a firm foundation by specifically referring to individual transactions with M/s Omni Auto Ltd. since the purchase orders were not before it. As already noted in Tata Engineering and Locomotive Co. Ltd. the Supreme Court has stressed the need to examine individual transaction while deciding whether it constitutes inter-State sale. This is more so here because there is no purchase order as was before the Assessing Authority when it passed assessment order for the year 2006-07. It is necessary to mention that the appellant’s Counsel has contended that in any case during the year 2007-08, the appellant has sold goods worth ₹ 23,87,389/- to Tata Steel. Assuming that reliance placed on purchase order of Tata Steel is right, the disallowance could only be to the extent of ₹ 23,87,389/- and not the entire claim of ₹ 32,24,63,898/for which there is no purchase order. This contention needs to be looked into - the matter needs to be remanded to the Assessing Authority with a direction to pass a fresh assessment order independently and in accordance with law after giving opportunity to the appellant to place its case before the Assessing Authority. Appeal allowed by way of remand.
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